Some evidence on the potential role of commodity prices in the formulation of monetary policy

Article Abstract:

The impact of inflation-driven commodity prices on monetary policy is analyzed using time series proportion of data from published UK commodity price indices and market prices of selected commodities during the period Jan 1974 to Dec 1990. Bivariate Vector Autoregression tests of commodity prices indicate that data from The Economist All Items Index reflect essential economic information that would be useful in predictng inflationary trends. Hence, when monetary variables are unreliable in forecasting inflation, commodity prices may be used as an intermediate control variable.

Inflation (Finance), Monetary policy, Price indexes, Inflation (Economics)

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Business conditions and speculative assets

Article Abstract:

There are time variations in the extent to which United Kingdom bond and stock prices are sensitive to data on business conditions. UK dividend yields can be used to predict excess returns. Default and term variables appear to be predictors of excess returns from bonds and stocks. The time-varying component of bond and stock excess returns may be understood in terms of risks linked to changes in business conditions. This is shown through multivariate regression analysis in addition to a latent variable model.

Financial markets, Stock price forecasting

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U.K. stock returns: predictability and business conditions

Article Abstract:

The hypothesis that excess returns on stocks and bonds represent expectations about forthcoming business conditions is examined. Results show that these returns are valid indicators of the business climate and inject a significant amount of predictability in the market situation including the degree of risk involved. Empirical data covering the period 1965-1992 for the UK is used as the basis for the analysis.

Securities

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